Missouri has amended its mechanic’s lien laws introducing unique pre-lien notice requirements for owners and lien claimants which are novel in Missouri. In fact, these pre-lien notice requirements are unlike any other state and therefore untested in their operation and effect on construction projects. The new statute applies to essentially all residential construction, except remodeling of owner-occupied property of four units or less, and impacts all residential closings on or after November 1, 2010.
Owners (usually the developer) must generally do the following under the new law:
- Record with the recorder of deeds a Notice of Intended Sale no less than 45 days prior to the earliest date the owner intends to close on the sale of the property.
- State in the Notice of Intended Sale the date on which the owner intends to close.
- Post the notice “at any job site office located at or near the subject property.”
- If requested by the lien claimant, provide the claimant with a copy of the Notice of Intended Sale and a copy of the legal description within five days of receipt of the request.
Lien claimants have additional requirements which generally are as follows:
- Record a Notice of Rights in accordance with the form approved by the statute, which notice must be recorded not less than five days prior to the intended date of closing stated in the Notice of Intended Sale from the owner. This obligation is conditioned upon the owner’s recordation of the Notice of Intended Sale.
- In its Notice of Rights, the lien claimant may identify others with whom it is contracting, but if the claimant does so, the claimant must identify them properly or risk waiving lien rights.
The most critical part of the new pre-lien notice requirements is its consequences for a claimant failing to follow it. A claimant who does not record a Notice of Rights when the duty exists will be deemed to have waived any right to assert a mechanic’s lien against the property. The new law appears to be a response to the economic downturn and the flood of mechanic’s liens on residential properties in recent years. While the Notice of Intended Sale and Notice of Rights increase responsibilities prior to lien filing, it appears that the statute is intended to act as a preventative measure.
Conceptually, payment issues for all parties performing work on a project may be more fully addressed earlier in the funding process since those involved in the project financing will have a better understanding of what first, second and third tier contracting parties are involved in the project, rather than finding out about these parties at or near the time the lien is filed and often after funds have already been advanced by the lender.
However, there are many kinks to work out given some lack of clarity in the way it is drafted and given that it is so different from other states that Missouri will be unable to draw from other jurisdictions for guidance. While it is advisable to obtain and thoroughly review a complete copy of the new statute, the statute raises some of the following questions:
- What notice requirements must be met if the owner does not intend to sell the residential property?
- Will the claimant waive its lien rights if its Notice of Rights improperly identifies parties with whom it has contracted?
- What is meant by “at any job site at or near the subject property” for posting the Notice of Intended Sale and at what point in time must the owner post this notice?
- If the claimant’s Notice of Rights provides inaccurate information that actually originated from the owner, will the claimant forfeit lien rights?
- What is meant by “commercially reasonable means” as it pertains to the owner’s obligation to transmit information to the claimant?
All of these issues will likely be addressed by the courts in years to come.
In addition to the pre-lien notice requirements, the new statute introduces many other significant changes which should not be overlooked ranging from the definition of a just and true account, to slander of title, to bonding over liens, each of which deserves its own separate discussion. Now is the time to update lien forms and develop and implement protocols that will minimize confusion and frustration later. Please feel free to contact a member of the Carnahan, Evans, Cantwell & Brown, P.C. Litigation Practice Group to discuss any questions you may have about these new laws, which will have an immediate impact on residential projects in Missouri.